There are a myriad of alternatives available to small-scale business owners looking for working capital loans to get their business off the start. These include SBA 7(a) or term loans and unsecured capital loans. You might also look into alternative financing models that could be used to help finance your small business.
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SBA 7(a) and term loans
If you are a small business owner and you are in need of working capital, you should consider applying for SBA 7(a) term loans. These loans are flexible and can be used for numerous reasons. The funds can be used to refinance loans, expand your business or even purchase assets.
The SBA guarantees the loan in part so lenders are less likely to default. The guarantee comes with a fee. This is typically 3.75 percent of the loan’s guarantee amount.
Interested parties can get an understanding of the SBA 7(a) loan by looking through the SBA website. They can also access the SBA Lender Match Tool, which matches applicants with lenders who have approval within two days.
Similar to most loans, rate of interest for 7(a) loans will vary in accordance with the amount borrowed and repayment terms. It is either variable or fixed and can be tied to the Prime rate.
You’ll have to fill out an application in order to apply for an SBA 7(a) loan. The lender will go over your financial records and evaluate your business plan. After approval, you’ll sign a loan agreement and receive the loan funds.
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Unsecured working capital loans
An unsecured working capital loan is a smart financial decision regardless of whether or not you are expanding or starting out. It can be used to purchase equipment to expand your business or even to upgrade your facility. The right option will make your business flourish.
The process of getting a working capital loan may be more straightforward than you think. A loan can be obtained with just one page unlike the line credit. You can even use 3 months of bank statements from your company to fund your loan.
Unsecured loans have higher interest rates. This is because the lender takes on a greater risk. Therefore an owner of a business must have a strong credit score in order to be eligible. It is also essential to have a plan to repay the loan in a timely manner.
Unsecured working capital loans are a great way for your business to cover short-term financial gaps. You can enjoy low costs for key products or improvements to your facilities through working capital loans. A working capital loan can allow you to keep your business afloat during difficult economic times.
An unsecure working capital loan also has a benefit: you don’t have to pledge any of your assets. Typically lenders will request the payment processor’s link and a deposit account.
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Smaller businesses have other financing options
Alternative financing models for small businesses are fast becoming the preferred choice for many entrepreneurs. These flexible financing options can help you get the cash you need for expansion.
Alternative loans are also less expensive than traditional loans. Banks typically require huge down payments, and you may have to wait for a while before they can provide the funds you require.
Lines of credit, merchant cash advances, invoice discounting, credit card and credit cards are all options for business loans. These options can help you to quickly get funding.
Business lines of credit work exactly the same way as credit cards, but they charge interest only for money that you take out. These options are especially beneficial for expenses that are short-term.
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Working capital loans are useful for everyday expenses such as ordering inventory or paying employees. However, they’re not an an ideal solution for large-scale business changes.
Choose a lender with experience in business loans for alternative businesses. Also, think about your credit score. The higher your score, the better your chances of receiving favorable financing deals.
Peer-to peer lending is another alternative financing option for small businesses. Similar to crowdfunding, these peer-to-business lenders offer small businesses loans from a variety of investors. This is particularly useful for small-sized businesses that do not have access to collateral.